• Those aged between 65 and 74 will be able to make super contributions regardless of whether they work or not.

• Tax deductions will be able to be claimed for personal contributions regardless of employment status.

• A lifetime limit of $1.6m will be placed on the amount of superannuation that can be transferred to start pensions.

• Earnings on investments held in ‘transition to retirement’ pensions will be taxed at 15% (currently 0%).

Measures not announced or affected

· Negative gearing

· Age pension and other social security benefits

Superannuation

Changes effective 1 July2017

Thefollowingsuperannuationreformsareproposedtoapplyfrom1July2017.

Cap on concessionalcontributions

The annual cap on concessional super contributions will reduce to $25,000, regardless of age. This change will reduce the amount of concessionalcontributionsthatcanbemadeeachyearwithoutataxpenalty.Therewill,however,alsobetheopportunityforcertain peopletocontributemoreiftheyhaven’tfullyutilisedthecapinpreviousfinancialyears—seebelow.

Concessionalcontributionsinclude:

· salarysacrifice

· superannuation guarantee

· personalcontributionsclaimedasataxdeduction,and

· certain otheramounts.

Currentlythecaponconcessionalcontributionsdependsonage—seetablebelow.

Table 1: Concessional contributioncaps

Age

Annual capamount

In 2015/16 and2016/17

From 2017/18

48 orunder

$30,000

$25,000

49 orover

$35,000

$25,000

Additional tax on concessionalcontributions

Broadly,anadditional15%taxonconcessionalcontributionswillbepayablebythoseearningmorethan$250,000pa.Currentlythis additional tax, which is, broadly speaking payable on top of the standard maximum tax rate of 15% on concessional contributions, onlyappliestothoseearningmorethan$300,000pa.

Table 2: Tax on concessionalcontributions

Income1

Taxonconcessionalcontributionsmadewithinthecap

In 2015/16 and2016/17

From 2017/18

<$250,000

15%

15%

$250,000 to$300,000

15%

30%

$300,000+

30%

30%

‘Catch-up’ concessionalcontributions

Concessionalsupercontributionsmayexceedtheannualcapif:

· theannualcapinpreviousfinancialyearsisnotfullyutilised,and

· thesuperannuationbalanceislessthan$500,000.

Onlycapamountsunusedfrom1July2017canbecarriedforwardforuptofiveyears.

Thismeasurewillhelpeligibleindividualswhohavenotbeenabletoutilisethecapsduetobrokenworkpatternsorcompeting financial commitments, to make additional or ‘catch-up’ supercontributions.

Contributions between ages 65 and74

Tax deduction for supercontributions

Taxdeductionswillbeabletobeclaimedforpersonalcontributionsregardlessofemploymentstatus.Currentlyonlyself-employed people (eg sole traders) and those who earn less than 10% of total income from employment sources are eligible to claim a tax deduction.

Superannuation pensionlimits

Alifetimelimitof$1.6mwillbeplacedontheamountofsuperannuationthatcanbetransferredtostartpensions.Thislimitwill be called the ‘transfer balancecap’.

Transition to retirementpensions

Earningsoninvestmentsheldin‘transitiontoretirement’pensionswillbetaxedat15%(currently0%).Atransitiontoretirement pension is a pension that is started with superannuation money when you have reached your preservation age, which is between 55 and 60 depending on date of birth. Once permanently retired (or another condition of release is met), it is expected that the underlying earnings will then be taxed at0%.

Change effectiveimmediately

Changes to non-concessionalcontributions

Alifetimenon-concessionalcontribution(NCC)capof$500,000willapplyfrom7.30pmon3May2016.AllNCCsmadeonorafter 1 July 2007 will count towards this lifetimecap.

Taxation

Personal tax ratechanges

Date of effect: 1 July2016

Theincometaxthresholdatwhichthe37%taxapplieswillincreaseto$87,001pa,fromthecurrent$80,001pa.Thereareno other changes to marginal tax rates. Individual taxpayers with an income below the new threshold will not receive any tax cut.Thosecurrentlyreceivingabove$80,000pawillreceiveataxsaving.Themaximumtaxsavingis$315pa.